Proposition 1 was turned down on the October ballot for the city of Unalaska, Alaska. Voter’s had to decide whether to increase the sales tax on marijuana, alcohol, and tobacco by three percent, effectively doubling the tax. There are several other cities in Alaska that had a sales tax increase on alcohol, tobacco, and marijuana on this October’s ballot as well. This type of tax is called a sin tax.
The act only needed a majority vote to pass, but the Unalaska tax increase proposal was not successful as 53% of voters elected against it. The purpose of the increase in these was to offset some of the costs going toward health care, education, and the Department of Public Safety (DPS). This was the main purpose behind the act, which was why the majority of the revenue from the sales tax increase would have gone to funding these areas. The city consistently spends a lot of money regulating alcohol, tobacco, and marijuana. The calls received by DPS often involve one of these three items, alcohol, tobacco, or marijuana, which is why those in favor of it believe it made sense to raise the sales tax on these products.
Those who voted against the sales tax increase explained they chose to do so because they believed increasing the sales tax would encourage users to look to the black market for these items, creating another problem in itself. If users looked to buy these items on the black market verses conventional stores this would take away existing revenue from purchases of these items.
We don’t usually hear much about Alaska as the population is so low compared to many other U.S. states, but people like to indulge there too just like anywhere else. Sin taxes are one of the first types of taxes that states and cities will look to increase when they are having budget issues. The reasoning behind this is that there is usually less push back on increasing taxes on optional items verses necessities.
In his law practice Mr. Donnini's primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini obtained his LL.M. in Taxation at NYU. Mr. Donnini is licensed to practice law in Florida. If you have any questions please do not hesitate to contact him via email [email protected] or phone at 954-639-4496.